INVESTMENT SECTORS IN INDIA

1. Post Office Savings Schemes (POSS)

Low risk and no TDS  POSS are popular because they typically yield a higher return than bank FDs. The monthly income plan could suit you if you are a retired individual or have regular income needs.  Besides the low (Government) risk, the fact that there is no tax deducted at source (TDS) in a POSS is amongst the key attractive features. 2. Public Provident Fund (PPF) Best fixed-income investment for high tax payers  PPF is a very attractive fixed income investment option for small investors primarily because of -  1. An 11% post-tax return - effective pre-tax rate of 15.7% assuming a 30% tax rate 2. A tax-rebate - deduction of 20% of the amount invested from your tax liability for the year, subject to a maximum Rs60,000 for a tax rebate 3. Low risk - risk attached is Government risk 3. Company Fixed Deposits (FDs) Option to maximise returns within a fixed-income portfolio  FDs are instruments used by companies to borrow from small investors. Typically FDs are open throughout the year. Invest in FDs only if you have surplus funds for more than 12 months. Select your investment period carefully as most FDs are not encashable prior to their maturity. 4. Bonds and Debentures Option for large investments or to avail of some capital gains tax rebates  Besides company FDs, bonds and debentures are the other fixed-income instruments issued by companies. As a result of an illiquid secondary market and a lack-lustre primary market, investment in these instruments is largely skewed towards issues from financial institutions. 5. Mutual Funds Unless you rate high on our Investment IQ Test, use mutual funds as a vehicle to invest  Have you ever made an investment in partnership with someone else? Well, mutual funds work on more or less the same principles. Investors pool together their money to buy stocks, bonds, or any other investments.  Investing through mutual funds allows an investor to -  1. Avail the services of a professional money manager (who manages the mutual fund) 2. Access a diversified portfolio despite making a limited investment

6. Life Insurance Policies

Don't buy life insurance solely as an investment  Life insurance premiums, depending upon the policy selected, include the costs of -  1) death-benefit coverage  2) built-in investment returns (average 8.0% to 9.5% post-tax) 3) significant overheads, including commissions. 7. Equity Shares Maximum returns over the long-term, invest funds you do not need for at least five years  There are two ways in which you can invest in equities-  1. through the secondary market (by buying shares that are listed on the stock exchanges)  2. through the primary market (by applying for shares that are offered to the public)